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Personal Loan Agreement Template

Here's what you'll find in the Personal Loan Agreement:

  • A contract template for those lending or loaning to a friend or family member
  • Tips on things to avoid, key items to pay attention to, and general resources which may be helpful
  • Advice on getting contracts signed quickly, digitally, and legally
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Personal Loan Agreement Template

A personal loan agreement, or promissory note, is a legally binding contract typically entered into between family members and friends. A loan agreement details the repayment of the loan and other important terms and conditions. A written loan agreement is important because it protects the lender. The lender can rely on the terms of the agreement to enforce repayment of the loan.

What is in this Personal Loan Agreement Template?

  • This personal loan agreement template was created to help you customize your own personal loan agreement.
  • Drafting tips on simple loan agreements
  • Details on how to get your Loan Agreement signed with ApproveMe

Why do you need a Personal Loan Agreement?

A personal loan agreement is needed when money is loaned. Loans are also known as “notes.” The party lending the money is referred to as the lender, and the party borrowing the money is referred to as the borrower. A written personal loan agreement protects the lender if the borrower fails to pay or if the loan goes into default.

A personal loan agreement should be in writing. This is for a few reasons:

  • Repayment terms are clearly defined
  • Parties are legally bound by the terms in the agreement
  • Protects the lender and provides a legal remedy

When lending or borrowing money from friends and family, it can be challenging to enter into a written contract because it is hard to imagine the deal will fall through. A written agreement illustrates the parties’ agreement and provides the lender with assurances if the borrower fails to repay the loan.

What is a Personal Loan Agreement?

A personal loan agreement lays out the terms of the loan. The agreement memorializes the borrower’s promise to repay the loan. The lender delineates the borrower’s financial obligations, and the parties agree to a payment plan. There are many types of loan agreements running from auto loans to business loans. However, personal loans are more flexible.

Loans can either be secured or unsecured. Personal loan agreements are generally unsecured. However, when a loan is secured, the borrower places a piece of owned property as collateral. Therefore, if the borrower cannot make their payments or defaults, the lender takes possession and ownership of the property. For example, it may not be sufficient just to describe the collateral as “my truck” or “my green truck.” Instead, it should be listed with the year, make, and other details like “ silver Mercedes SLK 250.” The more detailed, the better to eliminate the potential of any confusion in the future.

If the loan is secured, it is crucial to clearly identify and describe the property. If the borrower wants to list their truck as collateral, it should be specific and detailed. Sometimes personal loan agreements will include an interest clause. This is implemented when the lender wishes the borrower to pay a certain percentage of interest on a monthly, annual, or another agreed-upon basis.

Other Names for a personal loan agreement include:

  • Promissory Note
  • Loan Contract
  • IOU
  • Simple Loan Agreement
  • Personal Payment Agreement
  • Installment Agreement

What Should be Included in a Personal Loan Agreement?

Personal loan agreements are legally binding, so it is important to include certain elements to protect the parties to the agreement. Personal loan agreements will consist of unique clauses that may not be found in other contracts. Here are a few essential components of a simple personal loan agreement:

  • Parties to the agreement (Lender/Borrower)
  • Effective Date
  • Loan Amount (Financial Obligation/Amount of Money)
  • Payment Schedule, Installments, Payment Terms
  • Payment Due Dates (monthly, weekly, etc.) and Late Fees or other Penalties
  • Interest Rate (if applicable)
  • Collateral/Security (if applicable)
  • Dispute Resolution and Governing Law
  • Contact Information for the Borrower and Lender

The loan agreement should list the total amount of the loan. It should also specify if the repayment schedule requires a monthly payment or weekly payment.

Common Mistakes to Dodge when Drafting a Personal Loan Agreement

A personal loan agreement should incorporate any and all terms of the parties’ agreement. Some common mistakes in personal loan agreements include:

  • Leaving out the total loan amount
  • Failing to incorporate an attainable and reasonable payment plan
  • Omitting payment amounts, payment schedule, late payments, and late fees
  • Missing all appropriate signatures
  • Not reaching out to an attorney to obtain legal advice.

How to get your Personal Payment Agreement Signed

Look no further, ApproveMe has your solution. ApproveMe’s WP E-Signature tool helps you obtain legally binding electronic signatures while organizing all of your documents. ApproveMe is safe and secure. Check out our reviews from our satisfied customers here!

Financial Resources

As a new or seasoned entrepreneur managing your finances is critical. Here are a few links to explore focused on financial organization and efficiency:

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Personal Loan Agreement

THIS PERSONAL LOAN AGREEMENT (“Agreement”) is being made between ________________________________ (the “Lender”) with an address of _____________________________________________________________________________________and ________________________________ (the “Borrower”) with an address of _____________________________________________________________________________________ on this _____ day of ______, 20___.

IN CONSIDERATION THEREOF, The undersigned Lender and Borrower (collectively, the “Parties”) agree to the following:

LOAN. The Lender agrees to lend the Borrower $__________________ ( the “Loan Amount”) on the terms and conditions set forth in this Personal Loan Agreement.

FINANCIAL OBLIGATION. The Borrower agrees that the amount owed to the Lender is $___________________________ (“Debt Amount”).

PAYMENT PLAN. The Parties hereby agree to the payment plan set forth in Exhibit A attached hereto.
The Borrower hereby represents and warrants that the aforementioned payment plan was created in consideration for the Borrower to be able to make their obligated payments without causing further indebtedness or detrimental circumstances.

INTEREST. The Loan Amount is subject to the following:

[ ] The Borrower agrees to repay the Loan Amount at an interest rate of ______ % per ______ (month, year, other).
[ ] Shall bear no interest.
[ ] Other: ______________________________________________________________________
LATE FEE. If any payment under this Agreement are ____ day(s) past due, the Lender will:
[ ] Charge a late fee of ____ % of the payment owed for each following day the payment is late.
[ ] No late fee
[ ] Other: ______________________________________________________________________
SECURITY: This Loan is:
[ ] Secured. The property described as ______________________________________________ owned by the Borrower (the “Security”) that will transfer to the ownership and possession of the Lender.
[ ] Unsecured. There will be no Security under this Personal Loan Agreement

DEFAULT. In the event that the Borrower defaults on any payments and fails to cure the default within a reasonable amount of time, the Lender will have the option to accelerate and declare the entire remaining amount of the Principal and any accrued interest to be immediately due and payable.

SEVERABILITY. In the event any part or provision of this Agreement is deemed unenforceable or invalid, in part or in whole, that part shall be severed from the remainder of the Personal Loan Agreement and all other parts or provisions shall continue in full force and effect as valid and enforceable.

DISPUTE RESOLUTION. Parties to this Agreement shall first attempt to settle any dispute through a good-faith negotiation. If the dispute cannot be settled between the parties via negotiation, either party may initiate mediation or binding arbitration in the State of ________________.

If the parties do not wish to mediate or arbitrate the dispute and litigation is necessary, this Agreement will be interpreted based on the laws of the State of _________________, without regard to the conflict of law provisions of such state. The Parties agree the dispute will be resolved in a court of competent jurisdiction in the State of ______________________.

The prevailing party to the dispute will be able to recover its attorney’s fees and other reasonable costs for a dispute resolved by litigation or binding arbitration.

GOVERNING LAW AND JURISDICTION. The laws of the State of _______________ shall govern as to the interpretation, validity, and effect of this Agreement.
AMENDMENT, WAIVER, OR MODIFICATION. No provisions of this Agreement shall be amended, waived or modified except by any instrument in writing signed by all the parties hereto.

NO ASSIGNMENT. The Parties agree that they shall not assign or encumber their rights and obligations under this agreement.

ENTIRE AGREEMENT. This Agreement constitutes the sole and entire agreement of the Parties regarding the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, regarding such subject matter. This Agreement may only be amended, modified, or supplemented by an agreement in writing signed by each Party hereto.

COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile. email, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

ELECTRONIC SIGNATURES. This Agreement and related documents entered into in connection with this Agreement are signed when a party’s signature is delivered electronically, and these signatures must be treated in all respects as having the same force and effect as original signatures.
MISCELLANEOUS. This Agreement cannot be changed, modified, terminated, canceled, rescinded, or in any other way altered or negated unless the same is in writing and signed by the party against whom enforcement of the change, modification, discharge, termination, cancellation, or rescission is sought.

It is agreed that all understandings and agreements heretofore had between the parties are merged in this Agreement, which alone fully and completely expresses their understanding, and this Agreement has been entered into after full investigation and consideration, neither party relying upon any statement or representation, not embodied in this Agreement, which may be claimed to have been made by any of the parties hereto.

IN WITNESS WHEREOF, the Borrower and the Lender have executed this Personal Loan Agreement the day and year first above written.

Dated:_________________________________
________________________________________
Lender’s Signature
________________________________________
Lender’s Printed Name

Dated:_________________________________
________________________________________
Borrower’s Signature
________________________________________
Borrower’s Printed Name

Lender’s Contact Information:

Address: ______________________________
______________________________________
______________________________________
Phone Number: _________________________
Email Address: _________________________

Borrower’s Contact Information:

Address: ______________________________
______________________________________
______________________________________
Phone Number: _________________________
Email Address: _________________________

Exhibit A
Payment Plan

The parties hereby agree to the following payment plan: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Other: _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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